President Obama managed to arm-twist Congress into passing an unpopular healthcare bill. Not a single Republican voted for it.

Supposedly the bill will guarantee coverage of 94% of the US population.

Many corporations complain it will increase costs. For example: Deere says health care law will raise expenses

Deere & Co. said Thursday that changes to the health care law signed into law this week will raise related costs this year by $150 million.

The biggest U.S. maker of farm equipment became the second major company in as many days to say it would take a charge for fiscal 2010.

Deere and Caterpillar were among the 10 companies that sent a letter to Congressional leaders in December warning of cost increases. Others were: Boeing Co., Con-Way Inc., Exelon Corp., Navistar Inc., Verizon, Xerox Corp., Public Service Enterprise Group Inc., and Met Life Inc.

The companies say federal subsidies have covered 28 percent of the cost of retiree prescription drug coverage. The government offered the subsidies so that more companies would continue to offer coverage to retirees and keep them off of government-funded Medicare Part D.

Under the health care reforms passed this week, that subsidy will be taxed starting next year, which the companies predicted could significantly increase government health care costs because companies may drop coverage.

“Taxing the subsidy means that more companies will eliminate or reduce the coverage, and more retirees will shift to Medicare Part D, which will create more cost for both the government and the retirees,” the companies wrote in their letter.

How Will Corporations React?

Inquiring minds are reading interesting anecdotes about Healthcare on Silicon Investor. A well respected poster Hawkmoon writes …


Had a VERY INTERESTING conversation this evening with a CFO for a local business who employs about 100 people total..

I asked him how this health care bill was going to affect the company he works for.

He told me that he had run the numbers based upon providing health care for all of their employees and realized that he could save the company 1/2 million dollars by just paying the $2000 per employee penalty and not offering any coverage at all.

Is this how the government plans on taking over all health care?

If it’s more cost effective for business to just pay the penalty rather than provide coverage, I wonder how many are going to opt for that strategy?

Any other business owners out there have a different view?

Would be interested to know.


Another poster, “John M” responds …

I ran the same simulation for the company I retired from. As a retiree, I continue to be in their group plan, at my own expense.

They can save $607,000 by terminating the health insurance plan, offset by a fine of $200,000. The company may get an extra push to eliminate health insurance courtesy of penalties on “Cadillac” plans. A rate increase of 4.7% would push it into Cadillac territory, which is defined by costs, not by benefits.

If cost savings were distributed to employees as raises, employees would presumably be able to purchase non-Cadillac plans with better benefits, and some potential savings. If there are minimum benefit schedules, then price would be the major consideration in buying health insurance.

“The Reaper” responds …

I don’t know about companies but individually. I’m just going to pay the fine each year (which is minimal) until I need health insurance (with some kind of illness/accident) then buy the insurance since I can’t be excluded. With any luck I’ll make it to Medicare and I’ll have saved a bundle of cash.

Looking Down The Road

Little Joe writes …

It is only after this bill is law for 5 or 10 years that we will begin to understand its effects. I believe they will be:

1. Costs far greater than anyone is the Government is letting us know. I challenge to name 3 government programs that cost what the government claimed they would. I can’t think of one, except, I think I read, the prescription drug bill.

2. Like Mass. the costs will increase greatly on an annual basis.

3. The quality of medicine will drop drastically. Can you name me a single government program of this size that actually improves anything. Feds got into schools and they got worse, Feds got into energy and the situation is worse.

This is the governments track record:

1. Social Security we can’t pay for.
2. Medicare we can’t pay for.
3. Prescription drug we can’t pay for.
4. Spend more money on education than any other nation in the world and many kids, especially in inner cities can’t read their diploma.
5. Criminal justice system that produces criminal injustice.
6. Can’t defend our borders, even banana republics can do that.
7. Country hopelessly in Debt.
8. Economy on the verge of destruction.
9. Encourages lending to people who can’t pay loans back.
10. Encouraged casino risk taking by removing moral hazard, which is the trigger that set of the current catastrophe and now further eliminates moral hazard by guaranteeing bank loans to one another.

Most Americans have apparently become aware of the ineptitude of government. Those who haven’t are the ones who think this health care bill will be a good thing for America.

For now ….

What will your company do and what will you do?

Large corporations will probably pony up. There would be an enormous backlash if they dropped benefits.

Smaller companies are another matter. I suspect many struggling companies will drop coverage if there is an economic benefit.

Looking at individuals, the annual penalty is $695 dollars or 2.5 percent of income. The penalty cap is $2,250 per family as of 2016.

Many of the young and healthy will simply opt out. After all, the bill will not allow discrimination based on preexisting conditions. Thus, it practically begs the young and healthy to opt out.

Moreover, if we can judge from “The Reaper” many healthy individuals approaching retirement will opt out as well.

Illegal aliens sure will not be buying coverage.

Finally, there are many who cannot afford, or believe they cannot afford anything at all. They too will opt out if the fine is lower.

94% coverage as a result of this bill? Don’t count on it.

Mike “Mish” Shedlock
Click Here To Scroll Thru My Recent Post List